IPO fever is back in full force with the public announcement of Twitter's IPO plans to raise up to $1 billion.
Twitter's site was flooded shortly after 5 p.m. Thursday with tweets about the company's IPO filing.
The filing had been expected for some time and provided the first glimpse into the micro-messaging service's highly guarded financials. The numbers are mixed at best and leave savvy investors wondering if Twitter stock is a buy.
Indeed one of the most highly anticipated stock market debuts of the year, we still don't know the company's valuation because the number of shares and price range have not yet have been revealed. We will keep you updated on the Twitter IPO price and date when they're released.
What we do know is that in August, Twitter pegged fair value of its common stock at $20.62 a share. And with 620 million shares outstanding, that suggests a valuation of around $12.8 billion.
At $12.8 billion, Twitter valuation would be 28.6 times the last 12 months' revenue. That looks pricy when compared to Facebook stock, which sold shares for roughly 26 times revenue, and LinkedIn (Nasdaq: LNKD), which debuted with a price-to-sales ratio of about 14.5.
But Twitter is at a tipping point where fixed expenses are finally covered by revenue. And prospective users will propel profit margins going forward. Investors in a high price/earnings (P/E) initial public offering find that kind of margin growth reassuring.
"Whether it's worth $12 billion or not is really going to come down to how they can embrace this real-time news and information vision, how they can extend it to other revenue lines and how they can grow around the world," Brian Vlau, a tech analyst at Gartner Inc., told Bloomberg.
And the losses are a non-issue, according to Brian Wieser, an analyst at Pivotal Research Group. He told Reuters, "It would have been a surprise if they had a profit."
Goldman Sachs Groups Inc. (NYSE: GS) grabbed the top underwriting spot, with JPMorgan Chase & Co. (NYSE: JPM), Deutsche Bank AG (NYSE: DB), Bank of America Corp. (NYSE: BAC), Allen & Company LLC, and CODE Advisors assisting.
The $1 billion offering would be the largest for an Internet company since Facebook became a public company in May 2012.
Overshadowed by a number of technical and trading glitches, Facebook's IPO was a flop. Shares fell some 50% in their first three months of trading. Shares have since recouped those losses and surpassed $50 a share for the first time a few weeks ago.
The Twitter stock ticker symbol is TWTR, although it's not known whether the micro-blogging behemoth will list on the New York Stock Exchange or the Nasdaq.
Here's a breakdown of the good and bad numbers we learned from the Twitter IPO details:
Twitter members use the 140-character short-message service to share thoughts, ideas, updates, and more. Members run the gamut from elusive public figures, like the Pope, to world leaders to celebrities to businesses to stock pickers to politicians.
Some tweets that will go down in history include:
"People are getting cautious of the market right now," Moshe Cohen told MartketWatch. "People are worried about the markets fluctuating and that impact market confidence."
It's worth noting that Twitter already has better mobile revenue numbers than Facebook did when it hit the market in May 2012. The lackluster mobile revenue hurt FB stock for a good 17 months.
Ad revenue per timeline view is a key metric Twitter uses to evaluate its business. TechCrunch explains, "The company treats timeline views ('the total number of timelines requested when registered users visit Twitter, refresh a timeline or view search results while logged in on our website, mobile website or desktop or mobile applications') as a measure of user engagement, and it uses ad revenue per timeline view to track its ability to make money from that engagement."
TechCrunch notes revenue per timeline view was $0.80 for the three months ending June 30, up 26% from a year earlier. The number is notably higher in the U.S. ($2.17) compared to the rest of its global market ($0.30). However, the international number soared 111% year over year.
This is good - but the key will be if Twitter can attract advertisers that are flocking to Facebook in record numbers right now. Facebook has found a way to make advertising work, and Twitter needs more success in that arena to prove it's worthy of investment.
Speaking of Facebook, here are five ways the Twitter IPO won't be like its social media competitor...
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